This Powerpoint Presentation is about the Economy of India and its all termns covered by National Income

1. INFORMATION AND TECHNOLOGY Branch Code : 016
ENGINEERING ECONOMICS AND MANAGEMENT Subject code : 2130004
Presentation on
National Income
By Divya S. Modi

2. National Income

3. Introduction About Macro Economics
Macroeconomics
 Definition : Study of the behavior of the whole (aggregate)
economies or economic systems instead of the behavior of
individuals, individual firms, or markets (which is the domain of
Microeconomics).
 Macroeconomics is concerned primarily with the forecasting of
national income, through the analysis of major economic factors
that show predictable patterns and trends, and of their influence
on one another.
 These factors include level of employment/unemployment, gross
national product (GNP), balance of payments position, and prices
(deflation or inflation).

4. Introduction About Macro Economics
Macroeconomics (contd.)
 Macroeconomics examines economy-wide phenomena such as
changes in unemployment, national income, rate of growth, gross
domestic product, inflation and price levels.
 Macroeconomics (from the Greek prefix makro- meaning "large"
and economics) is a branch of economics dealing with the
performance, structure, behavior, and decision-making of an
economy as a whole, rather than individual markets. This includes
national, regional, and global economies.
 With microeconomics, macroeconomics is one of the two most
general fields in economics.

5. Index : National Income
National Income : Meaning
Macro Economic Variables
GDP : Gross Domestic Product
NNP : Net National Product
NDP : Net Domestic Product
Personal Income
Disposable Personal Income

6. Meaning
National Income

7. Basic macroeconomic concepts
National Income
 Macroeconomics encompasses a variety of concepts and variables,
but there are three central topics for macroeconomic research.
 Macroeconomic theories usually relate the phenomena of output,
unemployment, and inflation.
 Outside of macroeconomic theory, these topics are also important
to all economic agents including workers, consumers, and
producers.

8. Output and income
National Income
 National output is the total value of everything a country produces
in a given time period.
 Everything that is produced and sold generates income.
 Therefore, output and income are usually considered equivalent
and the two terms are often used interchangeably.
 Output can be measured as total income, or, it can be viewed from
the production side and measured as the total value of final goods
and services or the sum of all value added in the economy.
 Macroeconomic output is usually measured by Gross Domestic
Product (GDP).

9. National Income
National Income
 National income is defined as the money value of all the final
goods and services produced in an economy during an accounting
period of time, generally one year.
 Macroeconomics approaches the economic problems in terms of
aggregates like national income, general employment level,
aggregate demand, aggregate production and so on.
 The important among the above is national income.
 The one common thing to all products is value.
 Therefore, measurement of national income must be in money
terms.

10. Measurement of National Income
National Income
 National Income (NI) is the total money value of incomes received
by persons and enterprises in the country during the year.
 It is the sum of all incomes derived from providing the factors of
production, i.e., the return to all factors of production owned by
the residents of a nation.
 It included wages and salaries, rents, interests and profits.
 National Product or the National Income is, thus, the aggregate
money value of all-final goods and services produced in a country
during a year.
 The national income can be measured in three ways. They are:

11. Measurement
of National
Income
Income method
Sum of all incomes, in cash and kind, derived from
providing all factors of production in a given time period.
Production method
Sum of value of all the outputs (goods and
services) arising in several sectors of the
nation’s production during a given year.
Expenditure method
Sum of consumer’s expenditure, government
expenditure of goods and services and net
expenditure on capital goods. If properly calculated.
1
2
3
National Income

12. Macro Economic Variables
Stock and Flow Concept

13. Stock and Flow
Macro Economic variables
 A stock variable is measured at one specific time, and represents a
quantity existing at that point in time (say, December 31, 2004),
which may have accumulated in the past.
 A flow variable is measured over an interval of time. Therefore a
flow would be measured per unit of time (say a year).
 Flow is roughly analogous to rate or speed in this sense.

14. Macro Economic variables

15. Macro Economic variables
Stock and Flow in Accounting
 A Stock refers to the value of an asset at a balance date (or point in
time), while a flow refers to the total value of transactions (sales or
purchases, incomes or expenditures) during an accounting period.
 If the flow value of an economic activity is divided by the average
stock value during an accounting period, we obtain a measure of
the number of turnovers (or rotations) of a stock in that accounting
period.
 Some accounting entries are normally always represented as a flow
(e.g. profit or income), while others may be represented both as a
stock or as a flow (e.g. capital or Fund).

16. Macro Economic variables
Example of dynamic stock and flow diagram

17. Macro Economic variables
Example of dynamic stock and flow diagram

18. GNP : Gross National Product
What is GNP ?

19. GNP : Gross National Product
What is GNP and its calculations.
 Gross National Product (GDP) is defined as the sum of the gross
domestic product and net factors income from abroad.
 Gross National Product. GNP is the total value of all final
goods and services produced within a nation in a particular year,
plus income earned by its citizens (including income of those
located abroad), minus income of non-residents located in
that country. Basically, GNP measures the value of goods and
services that the country's citizens produced regardless of
their location.
 GNP = GDP + NFIA
 GNP = C+I+G+(X-M)+NFIA

20. What is GNP and its calculations.
 GNP= C+I+G+(X-M) +(R-P)
 Where ,
C= Total consumption
I= Total Investment
G= Govt. Expenditure
X= Exports
M=Imports
R= Receipts
P= Payments
GNP : Gross National Product

21. GDP : Gross Domestic Product
What is GDP?

22. GDP : Gross Domestic Product
What is GDP and its calculations.
 It is a key concept in the national income. "Gross domestic product
(GDP) is the total market value at current prices of all final goods
and services produced within a year by the factors of production
located within a country".
 Gross Domestic Product (GDP): GDP is the sum of money values of
all final goods and services produced within the domestic
territories of a country during an accounting year.
GDP= C+I+G+(X-M)
Where ,
C= Total consumption
I= Total Investment
G= Govt. Expenditure
X= Exports
M=Imports

23. NNP : Net National Product
What is NNP?

24. NNP : Net National Product
What is NNP and its calculations.
 Net National Product (NNP) is the net production of final goods
and services in a country during the year. It is GNP-depreciation.
 NNP also referred to as National Income at Market Prices.
NNP= GNP-D
Where D=Depreciation

25. NDP : Net Domestic Product
What is NDP ?

26. NDP : Net Domestic Product
What is NDP and its calculations.
 Net Domestic Product : An annual measure of the economic
output of a nation that is adjusted to account for depreciation,
calculated by subtracting depreciation from the gross domestic
product (GDP).
 When depreciation is subtracted from GDP, we get net domestic
product.
NDP=GDP-D
Where D=Depreciation

27. What is Personal Income ?
Personal Income

28. What is PI and its calculations.
Personal Income
 It is the total amount of money income actually received by
individuals from all resources during a particular year.
 It excludes undistributed profits of business concerns, income tax
paid at source, contributions to social insurance and provident fund.
On the other hand, it includes other items of income received by
individuals, which are not currently earned like old age pension,
unemployment dole, etc. These are called transfer payments.
 PI = NI – Corporate Income Taxes – Undistributed Corporate Profits
– Social Security Contributions + Transfer Payments.

29. Disposable Personal Income
Disposable Personal Income

30. Disposable Personal Income
What is DPI and its calculations.
 The amount of money that households have available for spending
and saving after income taxes have been accounted for. Disposable
personal income is often monitored as one of the many key
economic indicators used to gauge the overall state of the
economy.
DPI = Personal Income – Personal Income Tax Payments

31. THANKS